Understanding the Sino-Indian Relationship

Author: Ms Juli MacDonald

Period: April 2005 - June 2005

Understanding the Sino-Indian Relationship

Ms Juli MacDonald

 Objectives of Project

I am conducting research for a project that is a follow-on effort to the study I conducted in 2002 on the perceptions and expectations shaping the Indo-US relationship. While doing research for that project, I found that Indian thinking on China was much more nuanced and complex than I could explore in the context of the Indo-US relationship. The purpose of this project, therefore, is to delve deeper into the Indian thinking on China, particularly in the context of a rapidly rising China. 

This study, sponsored by the Director, Net Assessment, Office of the Secretary of Defense, US Department of Defense, seeks to :- 

(a) Understand how the Indian strategic community perceives China—as a potential threat and/or opportunity and how these perceptions might influence India’s strategic calculus over the next two decades.
(b) Identify and examine the drivers of potential Sino-Indian competition (or cooperation), as well as where and in what form competition (or cooperation) might manifest over the next two decades.
(c) Explore Indian thinking on different types of future China (e.g., fragile or strong) and the implications of these for Indian economic and national security policy.

Initial Insights

First, the general change in tone in thinking about China is striking. In 2002 and on prior trips, uniformly the people with whom I interacted referred to China as India’s long-term threat—Pakistan was a nuisance to be managed, but China represented the long-term threat that was most worrisome. During the past two trips, most interviewees did not start with the premise China is the long-term military threat or concern; although there were a few exceptions. Economically, China has been described as a benchmark to where India wants to be, particularly in terms of developing infrastructure and attracting foreign investment. I found the Indian interviewees to be generally unconcerned about China’s growing clout in Asia. Instead, China’s rise was framed as a motivator for Indian economic reform and growth policies to enable India to be a balance to China for states across the region. Strategically, China was described more as a rival than a threat. We heard concerns about China’s inroad in India’s neighbourhood, for example China’s growing relationships with Pakistan, Myanmar, Bangladesh, Sri Lanka, and Nepal. Clearly, the locus of strategic rivalry will centre around the Indian Ocean and expand in all directions. Interestingly, only a few Indians dwelled on concerns about China’s military modernisation and what that means for India and the region.
What was driving this shift in perception or shall one say a softening of views on China? Several recurring factors emerged as given in succeeding paragraphs.

First, India has a new found economic confidence. Indians believe that they can compete with China, particularly in the high-value-added sectors. Trade with China is seen as propelling growth in the Indian economy rather than undermining Indian companies, and Indian companies see opportunities to invest in the Chinese economy. Growing economic relations with China are generally perceived as complementary, creating a win-win situation for both countries. 

Second, the Indian military’s improved defence preparedness and strategic positioning contribute to a willingness to engage China. In particular, Indian military modernisation is paying dividends, although some feel that modernisation is being conducted in an ad hoc manner. In addition, India’s dominant position in the Indian Ocean gives the Indian Navy leverage over China, particularly as China’s dependence on West Asia grows. 

Third, the growth and expansion of the Indo-US relationship also fuels India’s confidence in dealing with the Chinese, particularly since this relationship clearly bothers the Chinese and is forcing China to take India more seriously. 

Fourth, several interviewees cited the natural advantages that India has over China that will help push India forward over the next two decades. For example :-

(a) India enjoys positive demographic trends. India will remain young as China begins to grow old.
(b) India’s political system is more stable, and market mechanisms are more mature, making it more able to deal with future challenges. In contrast, China’s system of authoritarian government coupled with an increasingly open economy is full of contradictions that will have to be addressed sometime in the future.
(c) India’s energy vulnerabilities may not be as great as China’s over the long-term—due to India’s proximity to West Asian supplies, promising domestic natural gas reserves, and slightly slower demand rates.
(d) India is an English-speaking country, making it easier for Indians and Indian companies to be players in the global economy.

Some interviewees were concerned that the softening of the perception of China reflects a lack of strategic thinking about China’s rising power and how India should be developing strategies to deal with this new environment. These Indians noted that the implications of China’s rise were absent from public discourse in India. Policy on China tends to be made by a small group of policymakers in the Ministry of External Affairs (MEA), the Ministry of Defence (MOD), and the Prime Minister’s Office (PMO) that may or may not draw on the body of work being done on China in Delhi’s vibrant think tank community. 

Second Set of Observations

This new confidence vis-à-vis China creates the context for my second set of observations. China is playing an integral role in India’s foreign policy objective of keeping its options open and avoiding any relationships that may constrain these strategic options. This is India’s new “non-alignment” strategy. One policymaker described this policy of non-alignment as an effort to maximise India’s strategic space by developing close ties with all of the major poles in the international system: the United States, China, the European Union (EU), Japan, and Russia. Today, it is clear that India has more strategic options than ever before. 

April 2005 was a busy month in India. During the Chinese Premier’s visit to Delhi the two governments announced the India-China Strategic and Cooperative Partnership for Peace and Prosperity and pledged to increase trade to $20 billion per year. And, of course, this trip was followed by the Japanese Prime Minister Koizumi’s visit to New Delhi, which resulted in commitments to build a closer strategic partnership.
A comparison of India’s relationships with three of these poles—the United States, China, and Japan—is interesting. The Indo-U.S. relationship is compelling because of shared values by the two democracies and, more importantly, because of a convergence of a number of strategic interests after the collapse of the Soviet Union. The Indo-US relationship has been propelled by expanding military cooperation and shared concern on strategic issues. The economic component of the relationship has lagged behind the strategic level of engagement. In Washington, the decisions to share technology in key areas are driven by a desire to build an enduring strategic partnership with India to face challenges in the future security environment. Unfortunately, promises have yet to produce tangible results. At a time when India has strategic options, Washington should not be hesitating. 

My preliminary assessment of the Sino-Indian relationship is that it is being driven primarily by growing economic ties that benefit both countries and a desire, particularly on the Indian side, to continue to move the border dispute forward. Due to the nature of the strategic rivalry between India and China and the lack of cultural ties and communication, the partnership certainly does not find anchorage in shared values and common strategic concerns the same way the Indo-US relationship does. Most Indians assessed that the Premier’s visit did not produce results commensurate with the rhetoric of a strategic partnership. Increasing trade to $20 billion and announcing the guiding principles for resolving the border dispute are encouraging, but I contend that announcing a strategic partnership is more about the Chinese—and perhaps the Indians—sending a message to Washington. The Chinese take the Indo-US relationship seriously and seek to counter it. The Indians may be using the Chinese to ensure that Washington does not take India for granted. 

India’s relationship with Japan has a strategic logic to it, particularly in terms of the increasing importance of sea lanes protection. In the context of a rising China, India is an indispensable partner for Japan. Both countries seek to bolster the economic side of the relationship as a way to sustain what could be an important strategic relationship in Asia. From Washington, Japan and India represent strategic book ends in Asia—both of which are critical to how the United States thinks about the future of the region. 

India’s policy of maximising its strategic space sounds good in theory, but what happens when things start to go wrong? How will India decide where it comes down on issues? What will India do if current tensions between China and Japan intensify or spiral into a conflict? Or if the United States and China find themselves in a military confrontation in the Taiwan Straits? Or if China seeks to take advantage of a destabilised Indonesia? All of these events will affect India in part because their outcome will determine the kind of actor China will become in Asia in the future. Will India remain on the sidelines—or sit on the fence—not taking sides? Or will India have to choose one relationship over the other to protect its strategic interests? How will India set its strategic priorities? 

India faces the same type of challenge in West Asia. India adeptly manages its close relationships with Israel, Iran, and the United States. But what happens if Iran declares itself a nuclear state? Each state holds a different view of the level of the threat posed by a nuclear Iran. How might the three countries work together to contain the threat? What are India’s strategic priorities in this situation? What role will India play if Iran becomes an overt nuclear power? 

The United States also needs to think about these issues carefully and understand the limits of what it can expect of India. India certainly will not forego its long-standing relationship and its critical energy ties with Iran because of the US opposition to a nuclear Iran. Instead, in my view, the United States and Israel should be talking to the Indians and thinking about how to leverage India’s close relationship to engage Iran before we must deal with an overtly nuclear Iran. Such a strategy may be even more critical if the EU talks with Iran fail, which appears to be the case.

Finally, I will end with several observations that were raised by one or more Indians or that we see from Washington about China’s activities in the region that have a direct impact on India’s interests in Asia.

First, China’s economic magnetism is pulling all of Asia into its sphere of influence. Trade with all Asian countries is growing and benefiting everyone. As China draws countries into its economic orbit, it is also using the regional organisations [such as Association for Southeast Asian Nations (ASEAN), Asia-Pacific Economic Cooperation (APEC), Shanghai Cooperation Organisation (SCO)] and bilateral agreements to instutionalise its growing economic clout. 

Second, China is strengthening its strategic and economic ties across Eurasia and beyond by using infrastructure and strategic resource diplomacy. As a case in point, on a recent trip to the Philippines, Hu Jintao agreed to a $500 million loan for a railway linking Manila and the northern provinces and a $950 million investment to develop a nickel mining project in the southern Philippines. China’s voracious demand for natural resources is benefiting states across the region but also expanding China’s strategic influence. This trend can also be seen throughout Eurasia, and even outside of Asia—in Africa and, of increasing concern to the United States, in Latin America, where China is investing in infrastructure across the continent to facilitate the production and transport of a range of strategic resources for Chinese markets. Of concern to India, China is also using infrastructure development to tighten its grip on Tibet. 

Third, China is “finlandising” all of India’s neighbours not only to neutralize them but also to gain strategic positioning in the Indian Ocean. This includes activities in Pakistan (such as building Gwadar), Bangladesh, Myanmar, Nepal, Iran, and some Indians also count Sri Lanka, and the Maldives among the states where China is increasingly active. 

Fourth, China is pursuing multiple strategies to secure its energy supplies—a continental strategy in which China will pursue pipelines across Central Asia and possibly from the Russian Far East; a diversification strategy in which Chinese companies are investing in projects around the globe; a West Asia strategy in which the Chinese are developing closer multi-faceted relationships with key Gulf suppliers, particularly Saudi Arabia and Iran (in fact, China defines the Gulf states as part of its extended strategic neighbourhood); and finally, a sea lane strategy in which China is developing relationships with key states along the sea lanes to monitor and potentially protect its energy imports—in a recent study on energy strategies, we called this strategy “China’s string of pearls.” 

Fifth, China is translating its economic power into military power. The People’s Liberation Army (PLA) is assiduously pursuing a military modernisation programme that regularly surprises US intelligence analysts about its progress. The Chinese are focused on using information technologies and command and control architectures to produce multiplier effects in their military. They are also developing or acquiring the capabilities to deploy an increasingly capable Navy. The worrisome part of the strategy is their focus on submarines. 


Ms Juli MacDonald is Senior Associate Booz Allen Hamilton a global strategy and technology consulting firm based in the USA.


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